EY Center for Board Matters

How boards can

prepare for a future
in the metaverse

It is crucial for boards to understand the strategic opportunities and risks associated with the metaverse
and underlying technologies so they can provide effective oversight.

Billed as the next stage of the World Wide Web, the metaverse
is a shared immersive virtual world that leverages a variety of
innovations and technical advances — from extended reality (XR)
to artificial intelligence (AI) — to foster new digital experiences.
As interest in the metaverse grows, so too do claims about the
extent to which it will transform our personal and professional
lives. In the face of such claims, many companies are beginning
to address how to enable trust in the metaverse.
Digital governance, a key enabler of trust, is becoming
increasingly important to companies across their broader
technology stacks, with considerable attention already placed
on how to responsibly govern data, AI and even quantum
technologies. Likewise, effective board oversight will be crucial
in the future of the metaverse and serve as a key differentiator
between organizations that thrive and those that stagnate.
By taking stock of what the metaverse is, understanding its
high-level technical foundation and considering a balanced view
of its risks and opportunities, boards will have the knowledge
to provide effective oversight as companies navigate value
creation in the metaverse.

In brief
• The metaverse brings exciting
new ways to live and work in an
immersive virtual world that may
present strategic opportunities
for organizations.
• The metaverse also raises new or
exacerbates existing risks that boards
should be aware of, including new
privacy and security concerns.
• Boards should prioritize oversight
of metaverse activities according
to potential risk exposure and stay
informed of relevant regulations and
ethical norms.

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How boards can prepare for a future in the metaverse

What is the metaverse and how does it work?

At its very simplest, the metaverse could be described as the internet in 3D. Conceptually, it is a series of connected worlds where we
can work, play, go to school, receive health care, be entertained and otherwise live in immersive 3D. Just as there is only one internet
and it has multiple websites, so, too, there is only one metaverse and it has multiple worlds.

As organizations begin to build, participate and transact
in the metaverse, boards must recognize their important
role in influencing metaverse investment decisions and,
increasingly, in helping organizations evaluate the ethical,
commercial and legal risks associated with emerging
technologies.
The metaverse is accessed not via a single technology,
but through multiple technologies, including laptops and
smartphones. Additionally, new technologies such as
XR — an umbrella term comprising virtual reality (VR),
augmented reality (AR) and mixed reality (MR) — are on the
horizon and expected to augment metaverse experiences.
These technologies can be used to extend or enhance
our perception of reality to create lifelike and captivating
the related notion of cryptocurrencies — decentralized digital
currencies — are often mentioned concurrently with the
metaverse. However, this can falsely portray that blockchain
is required to conduct financial transactions in the metaverse.
Standard e-commerce foundations and regular fiat currencies
(i.e., government-issued currencies) can and will also be used
in the metaverse to support commercial activities.
AI will also play a defined role in the growth and proliferation
of metaverse worlds in areas ranging from content moderation
to world building and user support. Consider a busy metaverse
mall filled with shoppers going about their day. We can expect
that many of the “people” may, in fact, be AI bots capable of
interacting with users in a highly realistic manner.

“
experiences for users. For example, consider an app that
leverages your smartphone camera to lead you on an
AR treasure hunt around your city, unlocking coins or
collectibles as you venture to new areas. Reports place potential value
Reports place potential value creation in the metaverse creation in the metaverse as between
as between $5 trillion and $13 trillion by 2030.1
Understanding how commerce functions in the metaverse
$5 trillion and $13 trillion by 2030.
will be key for boards to differentiate between fact and Understanding how commerce functions
fiction. For example, let’s consider blockchain. Blockchain
technology — characterized by its ability to enable a trusted
in the metaverse will be key for boards
decentralized ledger of exchanges across a network — and to differentiate between fact and fiction.


1
Metaverse and Money: Decrypting the Future | Citigroup

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How boards can prepare for a future in the metaverse

Tying these technologies together are three core values space have been trying to incorporate our olfactory sense
inherent to the metaverse as a paradigm: interoperability, into the metaverse for richer virtual experiences.3
immersion and creativity. For boards to govern well, they will
• Finally, and perhaps most important, is creativity. The
need a base understanding of these concepts.
metaverse promotes the creation of shared spaces where
• Interoperability speaks to the importance of having a users can express themselves, create and explore. Given
seamless digital user experience regardless of medium extensive interest in generative AI (i.e., AI methods used to
by, for example, enabling interactions between users create new content such as text, music or art), there’s also
engaging in a metaverse community from across different applicability of such techniques in the metaverse. What if
platforms. This is difficult today and the technology you could generate your own virtual world based upon
sector is working to solve interoperability problems. your imagination (and, of course, the limitations of training
As users of the internet, we expect to be able to jump data sets).
from one website to another easily. The same is true of
The criticality of building a high-level understanding of the
the metaverse: We expect to be able to easily move from
technical and philosophical foundations of the metaverse is
one platform to another, and we want to take our digital
paramount as boards strive to offer sound advice and counsel
assets with us.
regarding business model opportunities and risk mitigation.
• Also key to the user experience in the metaverse is the idea
of immersion. This relates to the importance of enabling
hyperrealistic environments and interactions, such as

“
those that can be facilitated by XR technologies. The
metaverse should feel like “we are really there” and not
just “watching” as outsiders like we do with our laptops,
phones or televisions today. And this extends beyond our
The metaverse should feel like ‘we are
visual and auditory senses. Some companies have emerged really there’ and not just ‘watching’
that sell haptic gloves — gloves that “use actuators and
motors to attempt to replicate the resistance you feel
as outsiders like we do with our
when gripping an object.”2 Others in the digital scent laptops, phones or televisions today.


2
This haptic glove lets you feel the virtual reality metaverse | TechRadar

3
Meet the companies trying to bring smell to the metaverse | Fast Company

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How boards can prepare for a future in the metaverse

What are key opportunities presented by the metaverse?

The metaverse is likely to be applicable to a variety of use cases — from entertainment to education, commerce, and even virtual
prototyping. When it comes to entertainment, we can expect more immersive extensions of what is already occurring in virtual worlds
on gaming platforms such as Fortnite and Roblox. The demand for such experiences is already palpable — a Lil Nas X concert held on
Roblox, for example, was “visited nearly 37 million times.” 4

From the perspective of training and education, one could
imagine the value of the metaverse to a medical student
to better simulate the conditions of an emergency room or
surgery during their classes. Or perhaps an elementary school
could virtually visit United Nations World Heritage Sites and
interact with digitally generated versions of historical figures
without ever leaving the classroom. Engaging in immersive
virtual public spaces will also enable cross-cultural experiences
that will be more accessible to a greater number of people.
In addition to external customer/user engagement, boards
even customer experience design. Imagine how much more
immersive virtual onboarding could be if new employees could
take a tour of their office before joining. This will be particularly
valuable for new joiners with accessibility needs and in our
hyper flexible working environments.
Of course, these are just a snapshot of the possibilities. As the
metaverse comes further into the mainstream, additional use
cases are likely to emerge. However, as we shall see, these
opportunities are not without their risks.

“
can help their companies understand the power of using these
platforms for their own internal learning needs, especially
for Gen Z and younger front-line workers.

Finally, in the working world, there is a fascinating intersection

between digital twins and the metaverse. Digital twins are, in
effect, a digital replica of a physical object such as a city, an
office or even Earth itself. They can be used to virtually test
new policies or business decisions before making changes in
the physical world. When combined with the immersion of the
metaverse, one can imagine “being” in the digital twin to help
with tasks such as product development, urban design and
In addition to external customer/user
engagement, boards can help their
companies understand the power of
using these platforms for their own
internal learning needs, especially for
Gen Z and younger front-line workers.


4
Roblox wants to build the Metaverse. Can it? | WIRED UK

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How boards can prepare for a future in the metaverse

What are the potential risks associated with the metaverse?

The internet as we know it today is the lifeblood of commerce and community. With it comes creative ways to engage with our
peers and conduct business that metaverse technologies will expand and evolve in novel ways. At the same time, the web has
introduced many concerns, ranging from online harms to data privacy, that are likely to be magnified by the widespread adoption
and commercialization of the metaverse.

Boards are essential to ensuring that an organization’s
strategy and direction are not at odds with its purpose, values,
and obligations to shareholders and broader stakeholder
communities, including society and the environment. To fulfill
this responsibility, it is key for boards to understand the risks
exacerbated by the metaverse and to add the corresponding
technical and social risk topics to the enterprise risk
management process.
First, there are concerns surrounding privacy. Due to the
suite of fine-grain biometric and emotional data likely
to be collected through metaverse hardware, there are
concerns regarding how this type of information will be
used — particularly in combination with advanced analytics
tools powered by AI.5 Given the distinct focus on algorithmic
manipulation and nudging in impending AI regulations, such as
the EU AI Act, and broader ethical concerns regarding the use
of technologies to alter human behavior, this is an area that
companies and their boards should pay special attention to.
Boards must focus on the privacy of customer and employee
data, depending on the applications at hand in the metaverse.
be compromised and precipitate digital identity theft, after
which users may incur reputational damage or financial losses.
Online harms should also be top of mind for boards when
governing the metaverse. Social media companies today
struggle with content moderation at scale to limit content
that may be derogatory, hateful, misinformative, immoral
or unlawful. Now imagine the challenge of moderating the
real‑time conversations and haptic interactions of thousands or
millions of people occurring simultaneously in a virtual space.
For users who will participate in virtual storefronts or attend
metaverse conferences and concerts, organizations operating
and building metaverse communities will need to think through
how they can ensure safety in these experiences. This will be
particularly true in cases involving users who are more likely
to experience online harms, including children, women, racial
minorities, and members of the LGBTQ+ community — all
priority oversight areas for boards as called out by various
stakeholders and especially investors.

“
When it comes to security, boards also need to recognize risks
across three core areas: devices, fraud and identity. One can
imagine targeted attacks on metaverse hardware, such as VR It is key for boards to understand the
headsets, that could be used to steal private information from
unknowing users. The metaverse is also likely to enable more
risks exacerbated by the metaverse
advanced or novel phishing and counterfeiting attacks, such and to add the corresponding
as plagiarized non-fungible tokens (NFTs) and scams to obtain
wallet credentials. Finally, there are concerns surrounding
technical and social risk topics to the
digital identity in the metaverse, whereby user accounts may enterprise risk management process.


5
Mind control: The metaverse may be the ultimate tool of persuasion | VentureBeat

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How boards can prepare for a future in the metaverse

Considerations for future-proofed boards

With a balanced view of risks and opportunities of the metaverse in hand, there are three things that boards can do today to
enhance oversight and add value

1      See through the hype cycle. Despite growing interest in 3      Understand regulations and ethical norms. Boards also
the metaverse, experts remain quite mixed on the extent help oversee compliance with laws and regulations. As
to which a robust system of metaverse communities will activities in the metaverse can rely on the use of digital
be realized and, further, whether such a future would currencies and other assets such as NFTs, transactions
be beneficial to society. To take a critical and measured could also trigger involvement from financial regulators,
approach toward the metaverse and its applicability to the including the SEC or Commodity Futures Trading
organization, boards should ask: Are we engaging with the Commission (CFTC) in the US and the Financial Conduct
metaverse due to its buzzword status, or does it pose a Authority (FCA) in the UK. Likewise, privacy regulators,
specific benefit to our business that enables long-term value including the Federal Trade Commission (FTC) in the US
without compromising our core principles? and the Information Commissioners Office (ICO) in the
UK, may also share jurisdiction over metaverse activities.
2      Prioritize oversight according to purpose and Boards play a key role in ensuring that companies
potential risk. Boards have essential responsibilities
understand and address all legal and compliance issues
to support corporate investments in new technologies
in support of management delivering on its metaverse
that boost the company’s strategy, purpose and values.
strategy. Beyond legal and compliance issues, companies
Board oversight is necessary if the metaverse is critical to
have an opportunity to shape the ongoing policy
achieving the organization’s strategic long-term objectives.
debate. Boards can explore how companies work with
For example, in the gaming sector, investments in the
policymakers to formulate practical rules and regulations
metaverse may be central to an organization’s products,
that promote innovation while respecting human rights,
services, and business model, which makes attentive
as well as delivering value to multiple stakeholders.
oversight valuable. However, when the metaverse’s value is
ancillary to the business or purely for marketing purposes,
oversight priorities and focus areas may be different and
not worth the effort. Similarly, more substantial oversight
is required when metaverse investments may threaten a
company’s reputation or legal standing. Where risks are
limited to financial or operational vulnerabilities, board
oversight may be more limited.

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Questions for the board to consider
In addition to seeing through the hype, prioritizing oversight
and keeping up with regulations and ethical norms, consider
the following questions to kick-start your engagement with
the metaverse:
• Is the metaverse strategic for our business or just all hype?
If the former, do we have the right skills to govern the
risks inherent in such platforms? Should the company’s
metaverse strategy become an essential element of the
corporate strategy?
• Has there been adequate due diligence of metaverse
investments, and are opportunities aligned to corporate
strategy, purpose, values and long-term value proposition?
What challenges might require investments in data privacy,
compliance, and fraud prevention?
• Does the board understand possible legal and accounting issues
arising from metaverse activities, including the purchase and
sale of digital assets to enable metaverse engagement?
• Is the company’s enterprise risk management program
forward-looking and focused on delivering strategic goals
and performance objectives from metaverse investments?
Is management deploying risk quantification tools to identify
and quantify metaverse risk scenarios?
• What “code of conduct” will ensure healthy cooperative
engagement in the company’s metaverse?
• What existing governance and ethics policies and procedures
can be used to support successful engagement in
the metaverse?
• Does the company have sufficiently diverse teams — in age,
identity, experience and cognition — to understand the
technical, commercial, ethical and legal dimensions of the
metaverse and its use cases?
• What new governance models are emerging from metaverse
activities, and what can the board learn from how they
are organized?
Looking for more?
Access additional information and thought
leadership from the EY Center for Board Matters
at ey.com/us/boardmatters.
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